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The revolution will not be monetized

For years, the internet's biggest players have hoarded your personal data and sold it for billions. Now, a band of angry startups is demanding privacy and aiming to overhaul the social-media business forever.

A man walks past a big logo created from pictures of Facebook users worldwide in the company's Data Center, its first outside the U.S. in Lulea, in Swedish Lapland. (Jonathan Nackstrand / AFP/Getty Images / Nov. 7, 2013)

By Will Bourne , Inc.com
July 11, 2014, 11 a.m.

There's a lot you won't learn about Nico Sell in the course of this story. You won't learn how to follow her on Twitter or Instagram or Vine. You won't learn her age, or where she lives, exactly, or the year she graduated from Dartmouth. You won't find out the names of her two girls or her husband's name or whether hers is Nico Sell at all. You won't even really see her face (she is prone to fedoras and dark glasses when there's a camera around). The woman is careful, or "properly paranoid," as she puts it. "You give people 10 data points about you and they can steal your identity," she says. "It's really pretty simple."

Sell is the co-founder and CEO of Wickr, which makes what the company says is an all-but-unhackable mobile messaging app. A pleasantly raucous blonde who would look right at home on a Harley, Sell says she's a "venture catalyst" in no fewer than 20 successful security companies. Wickr itself raised more than $9 million in March in a round led by Gilman Louie of Alsop Louie Partners (he's also the founder and former CEO of the CIA's venture arm, In-Q-Tel). Other investors included Juniper Networks; the Knight Foundation; a prominent counterterrorism adviser under Bill Clinton and both George Bushes; and the founder of DEF CON, one of the world's largest hacker gatherings. Sell has been part of DEF CON for "well over a decade," serving as the group's liaison with federal agencies looking to cooperate with white-hat hackers.

Sell, in other words, has seen the pale, sweaty underbelly of the Internet. She started Wickr to give her daughters a tool that would allow them to communicate safely, anonymously, with the capacity to control what information is retained on the other end. "If my 4-year-old can't use a button," she says, "we don't push it out."

In April, a Wired article on "The Rise of Chat Apps" relegated Wickr to a footnote, calling it an app for "an NSA-weary public and drug dealers." And the sudden popularity of these "ephemeral chat" tools — Privatext, TigerText, Whisper, Mark Cuban's Cyber Dust, the list goes on — is often explained as a consequence of Edward Snowden's 2013 revelations about the NSA's global surveillance programs. But Wickr, which was founded in 2011, has much bigger ambitions than helping people avoid the NSA: Sell wants to obliterate the business model on which the world's most powerful tech companies depend.

Sell is part of an idealistic but ambitious movement in Silicon Valley looking to flip the switch on how we live and share and do business online. These entrepreneurs see the status quo — in which users have signed away the rights to their data and online existence to Facebook, Google, Apple, Twitter, and a few other supremely powerful companies — as not just a violation of privacy but also as fatal to innovation. "We all assumed our data was private, and now we're realizing that it's not, and we're doing something about it — as a culture, as a society," says Brian Blau, Gartner Group's research director covering social networks. "I'm seeing this all over the place. The pendulum is swinging," he says, adding that he is in the middle of a project tentatively called "Power to the People." "If people demand better privacy controls, then the natural outcome is that they're going to want more control of their data, and eventually they'll realize their data has value. I think there's a big business there."

This sector is only just emerging, but Sell certainly sees the potential. "I want [Wickr] to replace Facebook and Skype — simultaneously," she says. And she isn't kidding. "We're hoping to create an entire marketplace and have thousands of apps running off Wickr software."

In fact, a cluster of young companies is forming around the premise that users will demand more control of their online data and that the Googles and Facebooks of the world will give in to that demand — or be replaced. As Johannes Ernst, CEO of the company that makes Indie Box, a personal server that debuted in May, asks: "Why can't we have all the same chatting and things we like to do online without Mark Zuckerberg in the loop? Why do we need him?"

Naturally, many eyes will roll at the thought of a guerrilla force of furry little "open Web" usurpers setting their sights on Zuck. But Apple laughed at Android, too, once upon a time. Sell believes we can rebuild our online lives around a new model and open up a vast commercial terrain in the process. "They are stealing," she insists. "I think that Google and Facebook, in another 30 years when we look back, will be the robber barons of our time."

"I communicate with a lot of people in places where they're tracking everything we're doing," says Thor Halvorssen, founder and president of the Human Rights Foundation in New York City. Halvorssen and his team started using encryption only about three years ago. "Some Tunisian guy got me started using Wickr, and we realized, 'This is awesome,' " he says, scarfing a steak tartare from Keens Steakhouse at his desk. He loved Wickr so much he invested in the company. "Viber, Skype, WhatsApp, email — all those platforms are penetrated," he says. "I see it every day. The Venezuelan state television plays people's Skype conversations on TV!"

Unlike its competitor Snapchat, which recently settled with the Federal Trade Commission after "deceiving" its users into thinking their messages and data weren't retained on company servers, Wickr's "perfect forward secrecy" software is as solid as anything out there, according to specialists who have studied it. Each identity you create in the app is password protected; each message has a timer feature that allows the sender to set an expiration date, from a few seconds to six days in the future, at which point the text self-destructs on the recipient's and sender's phones. All destroyed messages are then "digitally shredded" on the device, rendering them irretrievable.

Halvorssen's may be an extreme example, but it seems pretty clear that as the Internet penetrates every aspect of life, and as people looking to exploit that fact get better at the game, only the suckers will fail to protect themselves. And not just from hackers or the government. We've known for years that a big proprietary silo such as Google or Facebook makes money by scraping users' online personas for data, sifting the data for patterns, and charging advertisers for the chance to sell to its users through the insights those patterns reveal. But until last year, unless you were fairly deep inside the tech community, most reactions against that model were pretty muted. Any indignation lasted as long as it took for the next Drama Llama GIF to fly by on BuzzFeed.

Then came Snowden and his revelation that the NSA was harvesting data from companies that we had blithely trusted to keep our information private — including Facebook, Microsoft, Yahoo, Google, AOL, Skype, YouTube, Verizon, and Apple. Slowly, it dawned on the populace that maybe it was time to do something.

Today, Sell explains, for the first time, the technical tools to regain control over our data are in place at the same moment as the awareness of how badly they're needed. It's not about mere privacy or security, which are easy for people — especially interested parties — to trivialize. "It's more than that," she says. "I think instead of the word privacy, I would use the word ownership or control. That issue of control for me is why I've always boycotted Facebook. Because I didn't want to give my network, my friends, my pictures to someone else to own and control for the rest of history."

We are sitting in a restaurant in San Francisco's Mission, near Sell's office (which she refuses to let me see); she is laying waste to a piece of Peruvian chicken as she explains that the up-and-coming generation has already learned the perils of oversharing. "All the cool kids have already made the switch from Facebook," she says. "Now, when I tell people I boycott Facebook, they ask me how, and are very interested, instead of looking at me like I'm insane."

Sell is convinced that the demand for ownership will transform the marketplace. "With that demand will come other products," she says. "I think we'll see a lot more over the next decade. These are the kinds of companies that will thrive and survive."

Natalie Riley sees the same forces at work. The 24-year-old co-founder of Ansa, an encrypted ephemeral chat app that rolled out this year at South By Southwest and TechCrunch Disrupt, Riley agrees that something has changed in the public mindset. "People really are starting to be more aware of who is paying attention, who owns their data," she says. "A lot of this has to do with the Summer of Snowden, but people are just more aware of what's always been happening."

Riley sold her first startup, a doggie gift-box company, last year before leaving New York for San Francisco. She was initially going to launch just a messaging service that gave users the option of erasing their footprints. "As a function of listening to users and hearing what they wanted, I learned what a violation of privacy it was when your information is handed off — what's happening on Facebook, Snapchat, everywhere," she says. So her team of seven engineers rebuilt the back end of Ansa with "military-grade encryption." They tested the new version on 4,000 students at University of California, Berkeley.

The sorts of peer-to-peer encryption deployed by both Wickr and Ansa allow you to render your messages legally undiscoverable. "Most companies are structured with encryption to give you security," Riley explains, "but they have the keys to the encryption. And if they have the keys, they can unlock your messages. And if somebody comes with the authority to say, 'Unlock the messages,' they're going to have to." Wickr and Ansa use different systems, but each says its app's communications are useless to law enforcement or any other snooping body. The companies couldn't comply with a subpoena, because they literally do not have any information. Similarly, there's no point in the Feds' snooping around, because there is no data. It's gone.

In a charmless warren of offices just a few blocks from the Mountain View, California, Caltrain station — behind a sliding glass door with another company's logo on it — I am talking to the founders of MobiSocial, the company behind Omlet, an "open mobile social network" developed with National Science Foundation funding and incubated in the Stanford-affiliated StartX program. Monica Lam, a computer science professor who has already launched one company during a sabbatical from the university, is joining us by phone from Taiwan; the three young men in the room with me — T.J. Purtell, Ben Dodson, and Ian Vo — were Lam's Ph.D. students until they joined forces to take on Facebook.

Omlet also launched this year, and it was barely out the door before it had its first institutional partner: no less than Asus, the Taiwanese hardware maker, which has embedded Omlet in its new ZenFone, a smartphone it's selling worldwide.

Omlet is an insanely ambitious assault on the entire Facebook model of mobile social networking. Built for phones, Omlet feels natively mobile. And because its business model doesn't rely on selling eyeballs to advertisers, it's an entirely different experience. Text, photos, music, and polls start in the chat stream; users can connect multiple identities and use them to define their own groups, so your grandmother can see one version of you and your friends at school another. There's a check-in function like Foursquare's, a GIF-making widget, a way to create stickers. Users retain all their data, which is automatically stored on Dropbox, Box, a personal server, or another repository. If you don't want your data saved, it will disappear from the cloud after two weeks, and you can pull back pictures, text, and other content you've shared if you have second thoughts. And unlike Facebook Messenger, Omlet won't tell everyone where you are with every post.

Lam says Omlet aims to solve three problems with the Facebook model: "The first one is privacy — you want to be able to communicate without having your communication monitored and monetized. The second is monopoly. You don't have open competition; you have somebody who controls who wins and who loses and how much they charge for the service. There is no way a social network should be a monopoly — everybody suffers, from the vendors to the consumers. And that's the third problem: It really stifles innovation."

Lam wants to free companies with social businesses from having to subsist like sharecroppers on Facebook's estate. And now, with the number of "addressable teens" on Facebook falling more than 25 percent in the three years ended in January 2014, Lam and her team think the time has come.

And, according to Gartner's Blau, Facebook seems to be feeling some heat. "In the past few months, Facebook has invited me to a number of events where the message has been, 'We're listening to our users, we respect their privacy, and we're making changes to help with that situation,'" he says, in a telephone interview from his home in Oakland, California. But "with Facebook and these bigger companies that rely on your data, they're not changing the situation. Your data's still there. They're giving users a bit more control of their data, but that's about it." (Facebook refused to comment for this story.)

Blau envisions a world where companies that want users' data would have to compensate them for that information with goods, services, or fees; users would be able to decide which companies were trustworthy enough to be given access. "There's a lot of evidence that people's data--their opinions, what they do — is going to be a lot more valuable," he says. "People may turn that into hard cash." He is quick to point out that a lot of technology needs to be built and perfected before users can broker their own data this way. "But we're going to see these systems commonly within five years."

Opening up this market entails the creation of an entirely new universe of companies. "This is a gigantic opportunity," agrees Johannes Ernst. Ernst's Indie Box — a personal server that sits at the center of your "personal cloud" and allows a person, a household, or a small business far more data control and security than someone would get from a third party like Dropbox — is another brand-new addition to this constellation of services. "If this is the information age, then information has value," says Ernst. "And if it has value, how come everybody has it but us? Facebook has our friends, Google has our email, Flickr has our pictures — everyone has our data that we created, but we don't actually have control over it ourselves."

Ernst agrees with Lam that "the timing is excellent," that these are just the first moments in a commercial Big Bang that will open up all sorts of new space. "There's a ton of opportunity for applications and value-added services," he says. "The opportunity is on the order of magnitude of the apps on the iTunes Store and arguably larger."

Blau goes so far as to say that the "rise of data and privacy management," compounded by "the explosion of apps and services," will lead to an entirely new sort of application: personal software agents that "aggregate your data, manage it, and act on our behalf. Today, they're raising alerts; tomorrow, they're going to be negotiating deals for us. They're going to work for us — for you and me — not for the companies."

There are even nascent projects that would essentially rewire the Web and redistribute it away from the big server farms. SyncNet, built using a new product from BitTorrent called Sync, allows people to create websites without having to go through a central server at all. "That's what made the Internet powerful to begin with," says Eric Klinker, BitTorrent's CEO. "This idea that you would push control and intelligence to the edge of the network." BitTorrent, the once-infamous and now-reforming file-sharing service, launched Sync about a year ago as a Dropbox competitor that's "completely distributed and doesn't touch any servers owned by third parties," says Klinker. He also believes a new era of innovation may be upon us. "If you give users control of their data, you enable many more things to bloom on that very network," he says. "So we're hopeful that this is a renaissance of sorts, a return to first principles."

When tech people hear about Omlet, the first word they often say is Diaspora. A distributed, open social network, Diaspora, too, was designed to fight the power of Facebook, to protect user privacy. It, too, refuses to sell ads. It never shares data. Today, two-plus years after it was launched, Diaspora has a user base of about 200,000.

And that is the fear: A tiny network has no power and probably no future. But maybe this time is different. "This is why everyone wants their app to be preinstalled," says Monica Lam. With ZenFones already on the market, Omlet is getting a built-in footprint few developers can even dream of. And Lam suggests that her deal with Asus is just the beginning. "We have more partners signed up right now," she says, "but we cannot disclose them." (In early June, she was able to disclose that Samsung is installing Omlet on its Gear 2 smartwatch.)

Likewise, Sell is not naive enough to think she can get the kind of traction she'll need to replace Skype by relying just on kids to find her app in the App Store. She may have built Wickr to be consumer facing, but she is also attacking the problem at the topmost level. Essentially, she plans to incorporate Wickr tech into servers, routers, phones — wherever it can add value. "We want to be running all the financial transactions in the world," she says, as an example of the scale of her ambition. This makes the participation of Juniper in her funding round suddenly seem perfectly rational: Wickr may be on the verge of becoming part of the network infrastructure itself.

"I am under many NDAs," Sell cautions later, via Wickr. But she goes on to confirm that "we have signed one of the largest gaming companies and one of the largest financial companies in the world. We are negotiating terms with at least one carrier now. That is all I can say."

When a technology like Wickr becomes embedded in hardware, everything changes. When a huge telecommunications company can guarantee its users anonymous and secure communication, why would anyone sign on with a carrier that didn't offer it? Given a choice between a secure alternative to email (Wickr's next objective) and email from Google that comes with both advertising and the risk of NSA eavesdropping, who would opt for the latter?

The prospect of that kind of radical privacy terrifies some people. "There will be people who say, 'Oh, but wait a minute. This is going to be used by terrorists!' " says the Human Rights Foundation's Halvorssen. "My little cousin told me that Wickr was being used in Florida by a drug ring. And I said to him, 'My gosh. Do you think they also use Ford automobiles? Do they deposit money in banks? Do they eat at McDonald's? We've gotta shut all that stuff right now!'" Citing Thomas Jefferson's call for "eternal vigilance" by the citizenry, Halvorssen asks, "Why should the government have access to all of our stuff? If you want perfect security, put everyone in a box."

Unsurprisingly, Nico Sell is a George Orwell fan, especially of the slogans that adorn the wall of the Ministry of Truth in 1984 (war is peace, ignorance is strength). Mocking the statement that "privacy is dead" — the go-to motto for many of the companies, including Facebook, that profit from our lack thereof — Sell laughs and says, "Yeah, 'surveillance is your friend.' 'Resistance is futile.'" Then she puts down her coffee and the smirk leaves her face, her sarcasm giving way to bemused sincerity: "That's exactly what they want you to think," she says. "But resistance is here."

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